OIL And GAS

Contents

• Profile of Indian Oil & Gas Sector• Policy & Regulation• Opportunities in the Indian Oil & Gas Sector

PROFILE OF THE INDIANOIL & GAS SECTOR

Oil & Gas sector has a long history in India• Oil struck at Makum near Margheritain Assam in 1867• First commercial oil discovery in Digboi in 1889• Systematic E&P in 1899 after Assam OilCompany formed• 1947 India’s domestic oil productionjust 250,000 tonnes per annum• 1954 IPR - petroleum to be core sector• 1955 – ONGC set up• 1958 - First Gas & Oil pool discovered in Jwalamukhi(Punjab) and Cambay. Oil India Limited (OIL)was set up• Discovery of giant Bombay High field in 1974– Western offshore highest producer• 1991 – Liberalized petroleum exploitationand exploration policy

History

Oil & Gas sector has a long history in India• 1991-1994 – 4th, 5th, 6th, 7th and 8th Roundsof exploration bidding• 1999 New Exploration Licensing Policy (NELP)• 2000 – NELP II• 2002 – NELP III• 2003 – NELP IV• 2004 – NELP V• 2006 – NELP VI• 2007 – NELP VII

India has significant oil and gas reserves

Sedimentary Area• 3.14 Million Sq. Km(4% of the world’s sedimentary area)Sedimentary Basins• 26 ( Exploration initiated in 15 )Prognosticated Resources (O+OEG)• 205 Billion Barrels(For 15 Basins only; needs up-gradation)Established reserves• 61 Billion Barrels (as of 1.4.2006)

Sedimentary basin distribution

• The sedimentary basins of India, onland andoffshore up to the 200m isobath, have an arealextent of about 1.79 million sq. km. So far, 26basins have been recognised and they have been

divided into four categories based on their degree of prospectivity as presently known.

• Just over 60% of potential in oil sector has been explored so far

Exploration status by Basin and E&P operators

• The total number of significant discoveries madeduring the past five years now stands at 97. The most noteworthy of these discoveries are located in the offshore east coast basins of Krishna-Godavari and Mahanadi-NEC basins; Western offshore and onland in the Rajasthan, Cambay and Assam-Arakan basins

Annual crude oil production (Million Metric Tonnes)

• Total production of oil and oil equivalent gas(O+OEG) during the year is 64.389 MMT• Contribution from Pvt./JV small, medium anddiscovered fields during the year is 4.552MMTof oil which accounts for about 14% of thenational oil production

Annual gas production (Billion Cubic Metres)

• Total production of oil and oil equivalent gas(O+OEG) during the year is 64.389 MMT• Contribution from Pvt./JV small, medium anddiscovered fields during the year is 7.357 BCMof gas, which accounts for about 23% of thenational gas production

Refining activity has been steadily growing

• 19 refineries: 17 in Public Sector, 2 in Private Sector

• Capacity had grown from 62 MMTin April 1998 to 149 MMT in Jan 2007• Refining capacity expected to reach 235 MMTby April 2012• Surplus refining capacity of 86 MMT projectedin 2011-12• Large export potential

Energy consumption mix in India

• India still largely remains dependant upon coaland oil• The growth in demand is projected to catapultthe overall demand to 196 MMT in 2011-12and 250 MMT in 2024-25• Growing demand-supply gap has led the Indiangovernment to open up exploration andproduction to private participants throughNELP and develop a more holistic strategyfor acquisition of equity oil abroad

The demand – supply gap has been increasing

• Oil comprises about 33 per cent of India’sprimary energy consumption at present• Growth in demand is projected to catapult theoverall demand to 196 MMT in 2011-12 and250 MMT in 2024-25• Likewise, demand for NG i.e. Natural Gas (at morethan 120 mmscmd) in the country has far outstrippedsupply (about 75 mmscmd), and there has anincreasing trend towards emergence of newNG demand as well as conversion from existingfuels to NG

Extensive distribution & marketing networks

• Petroleum products marketing largely done by4 PSUs: IOC, HP, BPCL, and IBP• Extensive retail network – over 16000 outlets,6000 kerosene agencies and 5000 LPGdistributorships• Requirements of industrial units met throughdirect supplies• National Gas Grid planned• Approximate movement - railways – 40%;pipelines – 30%;

Key issues confronting the sector

• Absence of statutory framework in the upstreamindustry• Incidence of cross subsidy due to social obligations• Domestic reserves/production will not be sufficient• Cross-border gas pipelines facing uncertainty, butattracting interest• Inability to take international prices

POLICY & REGULATION

Policy regimes favourable for investments

• Refinery sector delicensed in 1998• New Exploration Licensing Policy (NELP)announced by Govt. in the year 1999• Administered Pricing Mechanism (APM) dismantledfrom April 2002• Marketing of transport fuels (Petrol, Diesel& Aviation Fuel) is now permitted subject tomeeting minimum investment of aboutUS$ 0.44 billion in oil and gas sector.• 100% FDI is permitted in Exploration, Refining,Pipelines (both petroleum products & gas)& Marketing• Six rounds of NELP (I to VI) completed• Over 150 exploration blocks awarded underfive rounds of NELP to domestic and foreignprivate companies• Investment commitment of more than US$ 12 billion

Long-term policy directions are favourable

• Planning Commission report on IntegratedEnergy Policy in August 2006• Oil and gas are expected to be the key drivers ofenergy consumption growth• Faster exploration of entire domesticsedimentary basins to augment domesticavailability of oil and gas• Improvement in oil and gas recovery levels• Exploitation of alternative fuel sources such asCBM, Gas Hydrates, Hydrogen fuel cell andblending of bio-fuels• Improvement in energy efficiency andconservation• Maintenance of strategic reserves in oil andpetroleumAcquisition of equity oil and gas abroad

Key functions of Regulatory BoardIn the case of city or local natural gasdistribution network : -• Decide on the period of exclusivity for buildingand operating the network.In the case of petroleum, petroleum productsand natural gas : -• Ensure availability• Monitor prices and transportation ratesto check restrictive trade practices• Secure equitable distribution• Enforce retail service obligations for retail outletsand m• Lay down technical standards including safetystandards for pipelines and other infrastructureprojects• Affiliate code of conduct for an entitycombining both pipeline and marketingactivities in natural gas, which may requireseparation of ownership and managementof abovearketing service obligations for entities

Various opportunities in the oil and gas sector

Oil• Investments under NELP• Destination India as refining hub• Increased investment in fuel quality upgradations• Building strategic petroleum reserve throughpublic private partnership• Acquisition of overseas oil assets• Competition in the downstream (retail andinstitutional) segmentGas• Domestic exploration of NG, development ofLiquefied Natural Gas (LNG) markets• Coal Bed Methane (CBM), Underground CoalGasification, Gas Hydrates• Development of National Gas Grid

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